HSA over-contribution if I lose my job part way through the year
How do I avoid penalty on excess HSA contributions?
The second way to avoid the HSA excess contributions penalty is through the “future year method.” It involves deducting some or all of your HSA excess contributions and applying them to a future year. The IRS does not allow you to apply more than you have in excess.
Can excess HSA contributions be removed without penalty?
Withdraw your excess health savings account contribution
If you find out you over-contributed to your HSA before the tax filing deadline, April 15th for most people, there is still time to correct your mistake. You can skip a penalty from the IRS if you take the extra money out before filing your taxes.
What happens if you accidentally over contribute to HSA?
HSA contributions in excess of the IRS annual contribution limits ($3,600 for individual coverage and $7,200 for family coverage for 2021) are not tax deductible and are generally subject to a 6% excise tax.
Are HSA contribution limits based on calendar year or plan year?
HSA contribution limits are determined on a calendar/tax-year basis. IRS rules state that contribution limits must generally be prorated by the number of months you are eligible to contribute to an HSA. Your eligibility is based on your coverage status on the first day of the month.
Can an employer take back HSA contributions?
Yes, in certain instances, an employer can recoup, or recover, contributions made to an employee’s health savings account (HSA).
How can I figure out if I overfunded my HSA?
If you had an HSA last year, your prior year tax return should indicate if you made excess contributions. This appears on Form 1040 and/or Form 8889, showing HSA amounts and/or a penalty for excess contributions.
What is the HSA 12 month rule?
It means that you must remain eligible for the HSA until December 31 of the following year. The only exceptions include death or disability. If you violate the testing period requirement, your ineligible contributions become taxable income.
Can I contribute to an HSA for a partial year?
For example, you are eligible to contribute to an HSA by December 1, 2022, and stay eligible through December 31, 2023. Your eligibility to make contributions to an HSA can change mid-year for many reasons.
Can an employer stop HSA contributions mid-year?
ANSWER: The short answer is that under proposed IRS regulations (which may be relied upon until final regulations are issued), employees may prospectively start, stop, or otherwise change an election to make HSA contributions through pre-tax salary reductions under a cafeteria plan at any time during the plan year.
What is HSA Last month rule?
“Under the Last Month Rule, if an individual is eligible on the first day of the last month of the tax year (December 1 for most taxpayers), he or she is considered an eligible individual for the entire year. HSA accountholders may utilize the Last Month Rule to make a full HSA contribution for that year.
Can an employer change their contributions mid year?
Q: Can employers make changes to employee contributions mid-year? A: Yes; however, there may be restrictions to those changes.